Why We Think Soundcloud Is Preparing For A Giant Data Mining Operation

You can compare the EDM scene to any other popular scene. It's currently in the middle of exploding and will survive beyond mainstream success. And ju

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Complex Original

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Like anything that's ever been popular, EDM culture undoubtedly going to crumble. All of the warning signs are in place. SFX Entertainment has been buying everything in their path to turn dance music into something of a Wal-Mart wholesale warehouse for all of your dance music needs. Our culture is being picked at and stockpiled right before our eyes, and EDM is turning into a train wreck waiting to happen.

Not that you care. Even with warning, people will sit complacently until there's something to complain about. We've kept you updated as SFX has monopolized, gone public, and starts to figure out how to monetize. SFX artists will have their records sold on Beatport (which is owned by SFX), pushed on websites that SFX has a stake in, and land on the Clear Channel radio stations that SFX has partnered with. Kids will spend their money at SFX-owned festivals. Our options and opinions will be handed to us, and the mainstream dance music culture will be even more one-sided than it already is.

The sad fact is that this industry has nothing to do with art anymore. We're living in a landscape where PR firms, booking agents, managers, labels, and websites are collaborating to convince fans that their product holds value, regardless of whether or not it's good. Dozens of genres produced by hundreds of next-level artists are being systematically pushed to the side. Fans don't question it because they're expecting their trusted resources to be handing them the best and most relevant music. The pool of people that control placement and flow (and ultimately the audiences) will get smaller and smaller.

But while SFX has been upfront about their moves, SoundCloud looks to be carefully and quietly plotting a move of their own. And in researching for another piece, I ran back across a seemingly simple article published by the Wall Street Journal stating that SoundCloud secured $60 million in funding, and was now worth $700 million. In this quick news piece, there is a note that this additional funding came from Institutional Venture Partners and The Chernin Group.

To the innocent bystander, this funding seems like a small event in the grand scheme of things. But the reason that I decided to dig deeper into this announcement was that this investment makes no sense whatsoever when you take a moment to think about what they're saying. A company that's already worth $640 million dollars has no logical need for additional funding. I decided to poke around a bit on these two investment firms, and the results are more than interesting. Peter Chernin, CEO of The Chernin Group, sits on the boards of Twitter and Pandora. This might seem like a non-event if you stop right there. But I didn't, and things got really interesting really quickly.

The other private equity firm investing in SoundCloud is IVP. They've invested in Zynga, which owns rights to Words With Friends and Farmville, amongst other games. Connecting the dots to Facebook isn't hard. They've also invested in Dropbox, as well as a ridiculous array of companies that specialize in storage, hardware, and software. And just like The Chernin Group, they've publicly handed money to Twitter. This is a blatant partnership between SoundCloud and those that have the ability to sway positioning on two of the biggest social media platforms in the world. The company holding the content received funding from massive investors that also funded companies that already have a stronghold in placing content.

Then we take a peek at four other investors that have ties to Soundcloud. Kleiner Perkins Caufield & Byers funded Google, AOL, Electronic Arts, and Zynga. GGV Capital funded Pandora and has a strong interest in mobile devices. Index Ventures funded Songkick and Last.FM, and Union Square Ventures funded Zynga, Twitter, and Tumblr. Twitter, Pandora, and the number one social gaming company in the world (which is a direct connect to the largest social media network in the world) are common threads between all of these companies. What if they're all coming together to partner with the most relevant source of music in the free world to mine your data?

The easiest way to do so is through cell phones, which we just stated as a field that GGV is elbowing through. Black Swan suggests that cell phone carriers are already looking to analyze and sell data that they have access to. But partnering with another giant set of resources to cross-reference that data on a device that knows where you are physically located at all times. And this article outlines how your information is already being sold. They aren't being very shy about it.

Forbes published an article last April that mirrored public speculation that SoundCloud might be making a big move, and said that "its owners sought to make SoundCloud a more viable business proposition by attracting a wider audience" and quoted a user that suggested that an already successful and financially sound SoundCloud was looking to seek bigger profits. To achieve this, bigger crowds are being attracted, but there wasn't any concrete answer to why. And when you piece everything together, it's enough to make you scratch your head.

SoundCloud has the power and could realistically be positioning themselves to be industry leader in monetizing online audio. All of the pieces are in place. They made their website easier for the average user to navigate. The recent addition of "trending audio" and charting system.  Their alliance with small and large record labels gives them limitless leverage with labels and artists. They are the industry standard. And their funders are funding other companies that have the ability to tap into every other facet of social media that you use. And sitting on advisory boards. It's the one lane that Google never got right, and it's happening right before our eyes.

This is all in black and white. The article in question is from the Wall Street Journal, not some EDM site run by kids. We're doing nothing but speculating, and will shrug as SoundCloud denies or ignores these connections that these new funders are holding onto. Our hope is that SoundCloud will continue to be a platform where underground stars can compete and succeed, but we can't ignore the funny feeling that monetization from data mining is what's lying underneath this odd string of coincidences.

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